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The paper provides a simulation model for kanban‐based scheduling in a multi‐stage, multi‐product manufacturing system. The model assists managers in determining the number of circulating kanbans and the corresponding container capacity. Each part is analyzed separately to find the optimum interarrivai time of the material handler, the optimum container capacity and the optimum number of kanbans. The analysis is based on the relationships between the overall cost and interarrivai times of each of these three input variables. Possible combinations of lot sizes are also investigated with the objective of reducing the number of such mixes. The results are used as an input for the multi‐product multistage simulation model to determine the best policy of mixed container capacities and number of kanbans. It is demonstrated that, given a set of operational conditions, a better design of a just‐in‐time manufacturing system can be attained through the application of the proposed simulation model.